Insurance Companies are Tightening Guidelines

Insurance companies are tightening their underwriting guidelines and limiting coastal exposure, in addition to jacking prices way up.

Here are the changes to note:

  • Markel – One of the more affordable companies will NOT insure any home built in the 1980’s or that is known to have or have had polybutylene plumbing. Even if it’s all been removed and replaced – NO.
  • Frontline – Another very affordable option will not insure anything built prior to 2005. Or give a homeowners policy on a roof more than 15 years old.  Most company’s limit is 20 years.  (You can still get a dwelling policy – but the coverage is nowhere as good, and the price is higher)
  • Farmers Insurance – They have pulled out of Florida completely. Who knows what other coastal community might be next?
  • NCIUA – This is becoming one of the better options but has a cap of $750,000. So additional riders are needed, which can get costly.
  • Under-insured – Most homes today are underinsured. At a meeting with our President and General Contractor recently, he quoted the base square footage price for building a new home today at a minimum of $300 per sqft!

With Nationwide pulling out of coastal markets, Farmer’s doing the same in FL, and many others really tightening their guidelines, we could really use a few years of very minimal hurricane activity!

If you need more information on the best insurance options for your OBX home, do please call Steve Bonday at 252-331-8233 or email at [email protected].

July Market Update

Happy 4th of July on the Outer BanksMid-year is upon us and not much has changed since the last report.  I did notice an interesting trend regarding CASH in our marketplace.  Here’s the deal.  There have been 136 home sales in Duck and Corolla since January.

Of those 136 home sales:

  • 32 Cash
  • 13 Jumbo Loans
  • 91 Conventional Loans

A conventional loan amount is $726,200.  With the typical 20% down, that means a purchase price of around $875,000.

  • Only 53 of the 136 homes sold were under $900,000
  • 83 homes sold over $900,000 up to $6,300,000
  • 13 were jumbo loans
  • 22 were cash
  • The average price is $1,251,000
  • The median sales price is $992,500

A jumbo loan amount is anything over the $726,200.  There were only 13 of those reported.  There were 48 Conventional loans in the $900,000 and up price range.  This means that 48 buyers out of 83 brought enough cash to the table to get their mortgage at or under $726,200.

To paint a clear picture – 32 cash buyers, 48 mostly cash buyers.  That’s 80 buyers (60%) who brought a ton of cash to the closing table to buy a home on the Outer Banks.  Including the highest sale of the year so far – $6,300,000 ALL CASH!!!!  This just seems amazing to me. (Here’s a link Click Here to View Listings to that home if you want to see what $6.3M gets you)

This is a clear indication that buyers have no problem parking cash in a beach home right now.  I mean, why not?  Let’s look at the 3 main reasons this could be a good idea.

  1. Rental income – If you choose to rent, the income will at the very least cover your mortgage. That means, future equity you reap, all paid by SOMEONE ELSE.
  2. Bank Failures – With banks failing across the country, and the Dodd-Frank Bill legalizing, if not mandating, “bail-ins” a lot of people don’t feel safe keeping their cash susceptible. Rather, they are investing in a tangible asset, and one they can enjoy themselves and have others pay for!
  3. Inflationary Fiat Dollar – Let’s get real, the price of real estate will NEVER go to zero. As inflation spikes even more and more out of control, the dollar is tumbling closer and closer to zero.  It seems buyers are hedging their bets on the tangible asset of real estate versus the tumbling value of the dollar.

We haven’t even begun to see the effects of the commercial real estate crisis looming.  This is widely affecting regional banks who are holding the notes on these buildings that are sitting empty in record numbers across major cities.

Don’t get me wrong, my message is not of doom and gloom.  What’s going to happen is going to happen.  My point is, what is your best move?

If you are considering selling, there are cash buyers waiting for your home.  We do have investment vehicles where you can put your money and AVOID capital gains tax in the meantime.  Contact me for more information.

If you are thinking about buying, get off the fence and don’t let the interest rates deter you.  You won’t have much competition buying right now and there are some great opportunities out there!

Welcome Summer!

Welcome Summer! Now that Memorial Day is behind us, it’s officially our summer season. It started with some interesting weather! I read that June is predicted to be cooler than normal. Once again reinforcing my pick for September as the best month on the OBX.

Market Report – I have to say in 26 years of being in this business, the market we have right now is the most odd I’ve ever seen. We have a lack of buyers AND a lack of inventory. With two major banks pulling out of the resort markets, there’s a bit of uncertainty to come. Read June’s FULL Report Here!

Mid-Currituck Bridge – No real construction news, but a win in the fight. The SELC has decided NOT to appeal the recent court’s decision. This will certainly save some time. While the plan seems to intend on moving forward, the environmental studies will all have to be re-done since they are more than 3 years old. Full article here.

Tax Deferred Exchange – Did you know it’s possible to sell an investment property and defer capital gains tax, WITHOUT having to do a 1031 Tax Exchange and buying another property? I have a handy PDF document I can send with more information if you’re interested. Just email me back to request it.

June Market Report

First let’s talk about banking.  Two major players (Citizens and Key Bank) recently pulled out of all mortgages in resort markets.  If you remember in March I wrote about the FANNIE MAE requirements for second homes that is making it extremely undesirable to get a conventional loan for a second home (higher rates, larger down payments, etc).  This means banks doing conventional loans have to add those loans to their balance sheet as they can’t be sold to FANNIE MAE without the extra high costs, which no one wants to do.  This caused these two banks to pull out of the resort markets across the US.  Will more banks follow?  I suspect at some point they will have to.

What happens if buyers can’t get a mortgage for a second home?  Or they become so scarcely available they price themselves out of possibility?  Do we become a cash only market?  Time will tell!

Meanwhile, rising rates have pushed buyer demand extremely low, and yet inventory is just as low if not lower.  This strange anomaly is the only thing stopping prices from plummeting down.

For example, here are the number of homes sold from Jan to May for the past 3 years:
                 Duck    Corolla         KDH,KH,NH
2023           29            82                      172
2022           68          136                     294
2021            58         241                      355
Conversely, take a look at current inventory levels
               Duck             Corolla            KDH,KH,NH
SFRES    14                     45                              52
The lack of demand indicates the prices should be affected by now.  However, so many homeowners either purchased with cash or have an interest rate of 3% or less.  I read an article the other day that 90% of all mortgages in the US are under 5%.  Who is going to sell and buy something else at today’s higher rate of 7%?  Not many, apparently!

The one thing that could cause inventory to jump this fall is the struggling rental market.  Whether it’s inflation, unemployment, or just being cautious, this year’s rental reports are showing some real struggles.  Across the country Airbnb owners are reporting 25% drop in bookings.  Most owners are making adjustments to the weekly rates to entice bookings.  Let’s just say it, the COVID rental bubble is officially over.  Back to the way it was before.  So, this could cause some of the short term buyers banking on high rental returns to throw in the towel and sell, while they can still get fairly good prices.

Either way, it’s going to be an interesting year for sales.  There are several things to watch, mortgage availability, rental performance, and increasing supply.  We could end up with a “perfect storm” this fall!

If you are thinking of buying or selling, call me to discuss the perfect strategy to fit your needs.

 

Happy March! 

The Month of MarchWhat a mild winter we have had here at the beach so far.  We are not complaining, that’s for sure.

I’ve got a couple of pretty interesting topics this month…let’s dive in.

Market Report

Anyone who knows me knows I’m generally an optimist by nature.  I have to say some of the economic factors going on are raising my level of concern for our local market this year.  While the OBX is a primarily second home market, we are late to see the effects of the primary market shifts.  Believe me, changes are on the way, click here for more.

Mid Currituck Bridge

Ah yes…the long-awaited bridge.  If you’ve been waiting around for this thing since the 90’s like me, you will probably see this as a nice reminder this project is not completely dead, and also hard to get hopeful again.  Read more here.

Taste of the Beach

Yes, it’s March and time for my absolute favorite OBX Event of the year!  If you’ve never been, you are missing out on some of the best dining experiences we have to offer.  If you can make it to town the weekend of March 24 – 26th, you won’t be sorry!  Let me know what some of your favorites are!  Click here for the event website.

Agent of the Year

I was honored and excited to receive this award again for 2022.  I’m grateful to my wonderful client base and friends for the amazing support I’ve had in my career.  This is year 27 for me in the business.  I have been very blessed. Read more here.

Outer Banks Market Update – March 2023

As of right now, the Outer Banks is experiencing what is considered to be a “normal market”.  That means we are not seeing prices change in any significant way up or down.  While prices are still at what is considered to be somewhat inflated, there’s not been real measurable changes so far.  Secondly, we still have a balanced level of inventory.  A normal market is considered to be a demand level of 4 to 6 months of inventory.  We are sitting right in the middle at 5 months of inventory.  This means the demand is steady and supply is still rather low.  In comparison at the peak times in 2021 and 2022, we had just a 2-month inventory.

This begs the question, where are we headed?  There are 3 factors I’m watching to help determine that.  What’s great about Beach Realty is we watch the statistics every single week.  It’s just as good as having a crystal ball. The numbers change in a gradual way that you can actually see the shifts coming if you’re paying attention, which we are!

Factor 1 – Mortgage Applications

Year over year nationwide mortgage applications to buy a home has fallen 41%.  In just a YEAR!  It’s currently at the lowest level in 28 years right now.  That’s even worse than the mortgage crash that happened in 2008.  Coupled with data from NAR, only 29% of recent home purchases are cash.  The most obvious cause is rising interest rates and still inflated home prices.  As a second home market, over 70% of our home sales are a discretionary purchase.  It’s a decision buyers can wait on, especially if they think changes are coming soon.

Factor 2 – FNMA and Second Homes

About a year ago Fannie Mae basically got out of the second home business.  Wanting to pull support from second homes and focus more on first time home buyer programs they negotiated a deal with the Mortgage Bankers Association to drastically increase rates on second homes.  Which at the time didn’t seem too objectionable on conforming loans because the conforming loan limit was $548,250.  With the average second home here being near $700,000, most buyers wouldn’t be affected.  Now the limit is $726,200 for a conforming loan, coupled with the most attractive rates being a now 75% LTV, the rates shot up over 7% with one point.  Making it even more expensive than ever to buy a home on the Outer Banks with a conforming limit mortgage. I don’t know the exact percentage of second home mortgages that are sold to Fannie Mae, but I think an educated guess would be MOST of them.  The only solution is for mortgage brokers to keep the loans on their books and try to offer more attractive rates.  Who knows how long that will last and how many lenders will participate.  I only know of one broker with that program right now.

Factor 3 – Rising Inventory

As buyer demand continues to soften due to rates and prices, inventory will start to creep up this spring and summer.  That could lead us directly into an inventory level over 6 or 7 months by fall.  That pushes us back into a buyer’s market.  If rental receipts drop this year, as expected, this fall we could see prices take a very noticeable hit.  How much is yet to be determined.  However, with as high as prices rose over the last few years, even a 10% drop would likely still put the home higher than pricing was in 2019.  So all is not lost, for this year at least.

If you’re thinking about selling, NOW is your window.  Give me a call to discuss further.

Beach Realty and Construction’s Agent of the Year for 2022

Beach Realty and Construction’s Agent of the year for 2022

Congratulations to Beach Realty and Construction’s Agent of the year for 2022, Ilona Matteson! This is Ilona’s third year in a row earning the title of Agent of the Year! In the year 2012 Ilona first achieved this award and has gone on to earn the title 5 more times! We are proud to have Ilona as a leader, trainer, and valued agent on our team.

Ilona Matteson brings a wealth of experience and knowledge to the sales team at Beach Realty & Construction. As a former sales manager for Beach Realty and a former coach for the nationally acclaimed Mike Ferry Organization, Ilona knows the real estate business inside and out. In 2004, she was selected for the annual 30 Under 30 feature for Realtor Magazine and was also a licensed instructor employed by the North Carolina Academy of Real Estate. Ilona has a thorough understanding of market conditions and works diligently for her clients.

Be sure to call Ilona Matteson for all your Real Estate Needs!

 

Happy New Year from the OBX

Hello and Happy New Year!

Happy New Year from the OBXWhat an interesting few years in the real estate world, and the world in general!  I got to spend a good bit of time with my niece and nephew over the last 18 months and do a little bit of traveling.  After 26 years in the business, I was so grateful and fortunate to have the opportunity to still assist some new and past clients while enjoying that precious time with family!
Market Update – I’m excited for what’s to come in 2023, and I’m sure you’re curious about what the market climate is right now.  Here’s a link to my 2023 Real Estate Market Predictions.  Hint, under contract and sold properties are already down 50% from this time last year.  What do you think will happen next?
Suggestions – As I gear up to write these informative messages to you, I’d like to know if there’s any specific topic you want to know more about.  Message me with your ideas!
Construction Projects – If you are interested in doing any work to your home this spring, I have a carpenter who actually has the next few weeks open.  His skill level is vast and can handle most small to moderate-sized jobs.  Flooring, decking, windows, some siding jobs, bathrooms, drywall, etc.  Contact me for more information.
2023 Goals – It is my goal to help 33 families buy or sell on the Outer Banks this year.  If you or anyone you know is interested, I would love to help!

2023 Outer Banks Market Predictions

After a few years of a WILD RIDE, things are finally starting to stabilize here at the beach.  A normal market (no real swing in value up or down) is defined by an inventory of 4 to 6 months.  We are currently just under a 5-month inventory, putting us smack in the middle of that range.  With this as our starting point, where might we be headed?

Pricing – Currently, pricing still feels on the high end.  The 15 buyer deep multiple offer scenarios are long gone, but we haven’t quite seen a sharp change in pricing just yet.  However, would you be surprised to know that even in the thickest part of the frenzy, still, 50% of all properties sold were for LESS than the asking price?  Below is a comparison of what the market did in January of 2022, fast forward to November, and then the average for the entire year of 2022.

2022 Closings          Jan %                     Nov %                        YTD%

Full Price                     23.86%                        22.05%                        23.90%

Over List Price             21.05%                        15.90%                        25.54%

Under List Price          55.09%                        62.05%                        50.55%

PREDICTION #1 – 2023 by year’s end we will move to 80% of homes will sell for less than list price.

Activity –  As I mentioned in the email, we are already seeing a 52% drop in the number of properties under contract as well as 50% drop in the number of sold from this same time last year.  Under contract percentage of inventory hit a peak of 48% and is now down to 26%.  So activity has SHARPLY moved downward.  An inventory bump of only 10% would push us over a 6 month supply and that is when we will likely see a major effect in pricing.

PREDICTION #2 – By June/July, the inventory will peak to a 7 or 8 month supply and pricing will start to be greatly affected.

Rentals – With the airline industry crippled in personnel shortages, among other things, including cost, our rental season will continue to be very strong this year.  People will prefer driving destinations over flights.  Our own rental numbers continue to show a steady growth patter for 2023.

PREDICTION #3 – If you do desire to buy or sell, rental income will remain a good investment strategy.

Interest Rates – We are seeing rates right around 7% for conforming, unless you choose the ARM option for either 7 or 10 years depending on the lender.  Banks right now are showing more favorable terms because they are able to designate more money to shelf these loans long term.  We know the FED wants to slow the interest rate increases, but with the recent $1.7 Trillion bill passed, it’s unclear how they will do that.

PREDICTION#4 – It looks like rates will hover in the 6.5% to 7.5% range.  If you want to take a chance on an ARM, that can get you lower.

Buyers – It’s no secret that the market is mid-cycle.  All the economic factors are present.  So if you want to sell your home in 2023, before things cycle back down, it’s important to understand the current buyer mindset.  Fewer buyers are in the marketplace, and as inventory goes up, it will start to push prices down.  However, I still believe real estate to be one of the best investments to make in an uncertain economy.  Why?  The value of the dollar is ever decreasing.  Real Estate is a tangible asset.  It has value beyond the “sales price”.  It can generate passive income, be used personally, create some tax benefits, etc.  I’m not worried about being able to find a buyer for your home.  What I do know is that financial experts will advise buyers to pay less in anticipation of a pricing adjustment.  This only means you have to truly strategize all aspects of the sale, not just price.

PREDICTION#5 – Condition, price, seller concessions for buying down points, lower due diligence offerings, staging the home, will become even more valuable negotiation points than we have seen in the last 2 years.

I’m personally excited for the market in 2023.  This is when truly skilled agents get to shine!  Negotiation skills and strategy will be more important, and so will having a professional on your side. If you have any questions about buying or selling, reach out!

March 2022 Market Update

Let’s talk about INVENTORY.  Most people don’t realize that inventory level is the key determining factor for real estate prices.  If I had a dollar for every time someone asked about the bridge in relationship to values, I would have a whole lot of dollars!  And yes, there are a lot of factors that play into value.

For example:

  • Condition – buyers today don’t want to fix old problems
  • Location – location has always been top of the list
  • Rentability – Not every buyer in our market cares about this, but it does help
  • Financing – Being able to get good terms
  • Insurance – Getting the best premiums makes the home more saleable

However, inventory levels trump all other factors when determining value.  Just 3 short years ago the inventory levels in Corolla were over 2 years.  Now, it’s barely one month.  The old faithful supply and demand is king when it comes to prices going up or down.

Let’s also realize these cycles historically (nearly 100 years worth of data) last for 20 years.  The last cycle began in 2000.  So regardless of COVID, we were due for an up market.  I do believe that COVID accelerated what should have taken 3 years to get where we are into 2 years.  That being said, the last up cycle lasted for 5 or 6 years.  It’s not clear how long this one will last.  Especially with everything going on, who knows.

What we do know is that watching the stats is the same as having a crystal ball.  Nothing can change until inventory levels change.  That doesn’t look to move any time soon.  We are just beginning the spring market where our inventory usually increases by 30%.

Here’s the number of homes currently for sale and under contract for each area.

Area                For Sale           Under Contract

Corolla –           22                    86

4 Wheel –         8                      8

Duck –              13                    23

Southern Sh     10                    16

Kitty Hawk      9                      8

KDH                 12                    53

Nags Head       12                    26

These numbers still blow my mind!  We all want to know what’s going to happen.  Here’s what we can count on, what goes up, must come down.  The big question is WHEN?  My answer, watch the inventory and you’ll know.  When we get back to 4 to 6 months, that’s when it will start.

Meanwhile, if you have any questions about buying or selling in this crazy market, give me a call!